According to the security firm, cybercriminals make upwards of $300 million from conning web users worldwide into downloading scareware.
The security firm also said it had seen a 660 percent rise in scareware over the past two years, and a 400 percent increase in reported incidents in the last 12 months.
"Even the savviest of computer users fall victim to online threats because cybercriminals have become so sophisticated," said Jeff Green, senior vice president of McAfee Labs.
The scareware scam starts with a pop-up that claims the web user's PC is infected with malware and then prompts the user to purchase the fake 'security software' which is actually malware in disguise. Cybercriminals also obtain the user's computer and bank details.
"It's an incredibly lucrative business for cybercriminals," added Francois Paget from McAfee Labs.
With this in mind, McAfee has launched the Consumer Threat Alerts program that is designed to warn web users about the latest and most dangerous online threats
McAfee said subscribers can expect to receive periodic email alerts about how to recognise the latest online dangers and tips on how to stay safe.
"We're giving consumers the 'street smarts' they need to live their online lives safely," said Green.
"With education and the right technology, we can all play a part in the fight against cybercrime."
See also: Fake antivirus scam hits Facebook
This story, "Scareware: Most Costly Security Scam of 2010" was originally published by PC Advisor (UK).